Charting IT's costs

AFTER BIG EXPENDITURES were made on ERP, Web servers, integration servers, and CRM, and now with downsized budgets, most IT executives are probably not out shopping for yet another piece of enterprise software.

But some weary tech execs are considering PSA (professional services automation). PSA was first pitched as a tool to increase efficiency in external services firms. It is now finding a home in internal service departments, the next growth market for PSA vendors, says David Hofferberth, research director at Aberdeen Group in Boston. Hofferberth says 2001 worldwide PSA sales were approximately $600 million. He expects the market to grow another 25 percent to 30 percent in 2002.

The reason, Hofferberth explains, is that internal IT departments and external consulting organizations have many of the same needs: resource management, financial controls, project management, and knowledge management -- all things PSA should address. "PSA software is a natural fit for corporate IT departments," Hofferberth says. The ROI departure point for IT managers starts with an internal IT department of 50, he says.

Getting the numbers down

Ken Brzozowski, vice president of corporate technology at Merrill Lynch, reached the same conclusion about two years ago. The Princeton, N.J., financial company had several different systems designed to handle functions including resource management, project management, and cost accounting. These systems were spread across four major divisions: Brzozowski's corporate and institutional client group (CICG); the U.S. private client group; the international private client group; and the Merrill Lynch investment managers group.

Brzozowski wanted a better handle on his group's cost accounting. "In the CICG we get revenue from clients and we have costs of doing business," Brzozowski explains. "One of these costs is technology. It is always going up, and we are under constant pressure to explain and justify this."

Explaining IT's ever-growing bottom line was especially hard for his group, which handles equity trading for corporate and institutional clients. "It is fairly easy to be straightforward when you are telling a CFO about the technology behind a new trading system. But it is far more difficult when you are talking about the maintenance costs of a legacy application or a global infrastructure," Brzozowski says.

In late 1999 there was no corporate sponsorship for installing PSA software to tackle cost justification and resource management. When Brzozowski found his colleagues had similar concerns, "we started a steering committee of all the different group CTOs," he says.

The investment managers group had plans to implement software from Business Engine, a San Francisco-based PSA vendor. The vendor reports list prices at $1,000 per seat with volume discounts available. "Typically at Merrill Lynch they would have just gone ahead with the project on their own," says Brzozowski. "But we started to see the value of doing this corporatewide."

One benefit to be seen from PSA software is in replacing older, and often homegrown, software that handled project budgeting, project management, time tracking, and resource management. "There are about 20 other systems that we plan to decommission," Brzozowski says.